It was the strong Chinese demand that was pushing up the POG in its run to $1921/ounce peak in 2011 and they may still remember how they became the bag holders previously, so I am not sure about how they will react now unless local inflation were to take off at a time of low interest rates there. The POG is going up in Chinese currency at present as the yuan is depreciating against the USD, and that may attract some Chinese speculation.
The peak in 2011 gold price was associated with their rising living standards and successful international trade measures - but as you noted, things are not going so well for them at present. Unlike for property speculation, very few Chinese would borrow to speculate on a rising gold price. However I am hopeful that with the souring of the Chinese property market that some of their wealthy will invest in gold. Offsetting this is that gold purchases as part of their love trade has/will deminish due to poor economic conditions.
Our main hope is that the increased prosperity in India and other countries in Asia leads to increased gold demand, plus there should be increased gold demand in more developed countries as inflation rates stay high and/or rising combined with falling interest rates leading to negative real rates that makes gold a more attractive asset. This will take years to play out.
loki
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